What Does Base Rate Mean

The term “base rate” can be used in reference to a number of different industries, including auto rental and financing of an auto purchase. The definition is basically the same with either example, only the usage differs slightly. It can also refer to the rate of pay being earned before any additional compensation, such as overtime or commission, is added on to the standard pay.

Renting

When used in reference to renting an automobile, the base rate is the basic price that the rental company charges for their daily, weekly or monthly rentals. There are many other charges that are added on to the base rate to calculate the final price, including state taxes, options such as a GPS device of child safety seat, additional insurance coverage, and various other fees. As most companies offer promotional discounts and various forms of coupons, those can be applied to lower the base rate before any other charges are added on.

Financing

The initial percentage that a financing company uses to base the payment schedule, interest and other conditions of a loan on is also referred to as the base rate. Factors such as a customer’s credit rating, employment status/income, and overall expenses, including bills, are all used to calculate the final conditions of a financing loan. The base rate in this circumstance is generally the same for everybody, the customer’s personal information being the deciding factor.

While the basic definition, as well as the general usage, is relatively the same, the application of the term can be somewhat confusing. Knowing how it is being used makes the difference between ignorant and informed.